Many people are interested in day trading but don't want to devote their entire lives to it or quit their regular jobs to do it. In actuality, many professional day traders only engage in trading on a part-time basis, spending one to three hours a day doing so before engaging in other pursuits. The following tactics might help you maximize your efforts in the least amount of time and prepare you for some of the difficulties you might encounter if you have thought about day trading as a part-time job.
Main points
- The hour after the market starts and the hour before it closes are the optimal times to engage in part-time day trading of stocks and futures.
- Depending on the pair you're trading and when their markets are open, you can trade forex part-time on any day of the week.
- Casual day trading is appropriate for education but not as a means of support.
Part-time Day Trading in Stocks and Futures
Only one to three hours a day are required for day traders to trade equities or futures markets. Despite the fact that some day traders do trade continuously throughout the day, the best gains are often centered around the official opening and closing of stock trading. These take place at 9:30 and 4:00 EST, respectively. Pay close attention to the opening of trading when you first begin part-time day trading stocks. Prepare yourself for your first trade by sitting down at your computer between 9:00 and 9:15 a.m. If you don't have much time, the first 30 minutes of the day are typically the most volatile and offer the greatest opportunity for profit. Finish trading by 10:00 or 10:30 a.m. EST if you have an hour to spare. Extend your day of trading till 11:00 a.m. EST if you have some more time. You'll often find fewer possibilities as lunchtime draws near, and deals take longer to finish as volatility begins to decline. Consider day trading from 3:30 p.m. to 4:00 p.m. EST if you can only trade later in the day or close to the open and close of trading. The trading day concludes at 4:00 p.m. because day traders close all positions before or at the closing bell. The same circumstances apply to futures trading as they do to the stock market. Just before and after the US stock market opens, you'll probably notice the most trading activity taking place in the futures markets. This is especially true for futures contracts linked to stocks, such as the E-mini S & P 500 (ES), one of the best contracts for day trading.Forex Day Trading on the Side
The foreign currency (forex) market offers a flexible alternative for day traders who only have one to three hours at odd times of the day or night to day trade if they are unable to trade during stock market hours. Currency pairs are used in forex trading, with the euro and the US dollar (EUR/USD) being the most frequently used pair. Some further well-known pairs are GBP/USD, AUD/USD, and USD/JPY. Various times of the day tend to be when each couple is most active. 3 The highest action is seen when trading the EUR/USD or GBP/USD, suggested pairs for day trading, around the opening of the U.S. stock market and for a few hours afterwards, from 8:00 a.m. to roughly 11:00 a.m. EST. If that time doesn't work for you, day trading is also recommended from 1:00 a.m. to 8:00 a.m. EST. While this time frame isn't the most turbulent, you'll find tradable trends that frequently emerge during this time because Europe is available for business during these hours. 4, This also serves as a good substitute for those who prefer not to trade right before the U.S. market opens. Every hour of the day has a distinct dynamic, and over time, traders might come to favour one hour over another.Trading: Casual vs. Part-Time
The mentality you get when day trading part-time is one of the hazards. For instance, a lot of prospective day traders don't know the difference between casual and part-time trading. Many experts advise part-time work since, like them, you can trade every day during the ideal periods of the day and then engage in other activities. A casual day trader, on the other hand, engages in day trading whenever the urge strikes or when time allows. This is not advised because it usually indicates that you haven't done any actual preparation, your trading activity lacks structure, and since markets behave differently throughout the day, trading at random or casual intervals won't result in a successful strategic move. Part-time traders trade often but not continuously throughout the day. Casual traders could engage in trading for several days before taking a break. You become less alert, your reaction times slow, and you become more prone to errors as a result of these activity bursts followed by intervals of inactivity. A part-time day trader is possible, but don't be a casual one. Instead of using your smartphone in the office restroom, switch to a desktop or laptop at a designated period of time each day. While those that take trading seriously and always seek to improve their technique will get your money, if you are unorganized and casual about it, you will lose it. Part-time trading should be done correctly, managed like a part-time job or business, or avoided altogether.Paid Part-Time
Because only a few particular times of the day offer the best profits for their techniques, the majority of full-time traders who depend only on trading end up trading part-time. Because of this, the terms "independent full-time trader" and "independent part-time trader" are frequently used interchangeably. That translates to not giving up a lot of potential financial gain. For instance, a part-time trader might discover that, by only trading during the best two to three hours of the day, they can make an average of $500 each day. They would sit and stare at their screens when good trading opportunities often don't materialize if they forced themselves to trade all day. This would produce a fairly similar daily profit outcome but significantly lower earnings per hour of trading. When compared to trading all day, trading during the optimal times of the day for your approach won't cost you much in terms of earnings.One last thought on part-time day trading
With stocks, futures, or currencies, day trading on a part-time basis is simple. Find out what times of day present the best trading possibilities for your trading approach. Trading at the official open or close of the U.S. stock market is your best choice if you're trading stocks or futures. The optimum trading times for the forex market are during the European or U.S. sessions of the day. If you trade frequently, part-time trading can be successful. If you wish to casually dabble, it's rare that you'll develop consistency; as a result, you might make some money but give it back immediately. When you've perfected your approach and method, day trading really only requires part-time hours. However, learning how to day trade successfully may feel like a full-time job.Questions and Answers (FAQs)
Is it sometimes possible to day trade without developing a pattern? A pattern day trader is someone who makes more than three trades per week. There are certain benefits to this, such as more leverage, as well as additional rules, such as a $25,000 minimum account equity requirement. Even if three trades a week is considered part-time trading, it would be challenging to gather the experience necessary to create successful trading methods. How do day traders file their taxes? On Schedule D of Form 1040, day traders report their earnings as capital gains. Your brokerage will send you a 1099 form with the data you need to file your taxes. You will pay your full income tax rate on your winnings as a day trader as you won't qualify for any tax breaks.